House adopts conference report creating CHIP, a $200 million tax-increment tool for housing

The Vermont House adopted the committee of conference report on Senate Bill 127, an omnibus housing measure that creates a Community and Housing Infrastructure Program (CHIP) using tax-increment financing, and approved sending the action to the Senate. The roll-call result was 137 in favor and 2 opposed.

Members said the conference committee spent several days negotiating compromise language. "The conference committee met for the last 3 days this week in discussions I think I would characterize as not boring," the member from Callas said as she introduced the report and asked the House to adopt it.

The chamber’s nut graf: supporters said CHIP is intended to spur new primary residences across Vermont by allowing municipalities to capture a share of incremental property tax to pay infrastructure costs; critics warned it diverts revenue from the education fund.

The bill contains multiple elements retained from earlier versions: the Vermont Housing Rental Housing Improvement Program (VHIP), a Manufactured Home Improvement and Repair Program for mobile home parks, and an infrastructure sustainability fund administered by the Vermont Bond Bank. The conference report also leaves intact technical corrections to the rental housing revolving loan fund administered by the Vermont Housing Finance Agency (VHFA).

CHIP specifics and guardrails. The bill creates a tax-increment mechanism modeled on the state's TIF program but limited to projects whose purpose is to create new primary residences. The conference report sets an overall cap of $200,000,000 in aggregate tax-increment retention. For projects that include at least 15% of units as affordable housing, municipalities may retain 85% of the incremental education property tax; projects that do not meet that affordable threshold may retain 75%.

The member from Woodstock, who presented the CHIP provisions on the floor, summarized compromises: "Not all roads are straight, not all roads are smooth, but when you really wanna go somewhere, you take the road that'll get you there." He said the conference adopted the senate's definition of affordable housing for the program and preserved a "but-for" test, with an exemption for developments that dedicate at least 15% of units to low- and moderate-income households.

Project and affordability thresholds in the report require that a proposed housing development have at least 60% of its floor area dedicated to housing (the conferees reduced an earlier 65% threshold to 60%) or otherwise "meaningfully address" the statute's purpose to create primary residences. To qualify for the higher increment retention, a development must meet the specified percentages for affordable (15%) or moderate-income (25%) units.

Timing, review and limits. The conference report extends the program authorization so that applications may be submitted through Dec. 31, 2035. The Legislature set the statutory cap at $200 million (the House had proposed a lower annual cap of $40 million). The Vermont Economic Progress Council (referred to in the debate as "Vepsi") will review applications and provide annual reports; the retention percentages are set to be reviewed after 10 years rather than five.

Changes and items omitted. The report adds citizenship and immigration status to the list of protected classes in residential-housing provisions and replaces prior language to clarify that landlords may not require a Social Security number on a residential rental application. A proposed residential universal-design study committee was omitted for now, and a VHFA study on off-site modular housing was dropped because the agency told lawmakers it lacks staff and the study was not funded in the conference budget.

Governance and membership. The conference report adds the executive directors of the Vermont Housing Finance Agency and the Vermont Housing Conservation Board as voting members of the Vermont Economic Progress Council for CHIP reviews; the commissioner or director of Housing and Community Development (ACCD) will be a nonvoting participant, according to the floor summary.

Discussion and dissent. Several members urged caution about the program's fiscal effect on the statewide education fund. The member from Georgia asked whether there was an estimate of how much would be diverted from the education fund; the member from Woodstock said the fiscal impact was difficult to estimate and that the $200 million figure reflected infrastructure needs tied to an assumed level of new housing starts. The member from Waterbury, who voted yes, said the bill "will do too little to improve the housing status of people who are homeless or very low income."

Final steps. After the roll-call adoption (137-2), the House suspended its rules and messaged the action to the Senate forthwith. The House also set reporting and review requirements by Vepsi, including annual reports and a 10-year performance review of retention percentages.

What remains unresolved. The conference report removed a proposed sunset on the statewide TIF program, and the conference agreed not to include contiguous parcels in CHIP projects (contiguous parcels developed later would be treated as separate projects). The Land Use Review Board was directed to report earlier—the due date for an assessment was advanced to Nov. 15 for legislative consideration.

Members emphasized the bill is one tool among many to address housing needs and said further legislative work will be required to target rural areas and very-low-income housing.